Although Chinese regulations proved to be a drag on IPO [initial public offerings] numbers, Asia-Pacific still managed to top as the world’s busiest region for new listings in the first quarter.
Accounting for 55% of deal activity, the region recorded 157 IPOs, amounting to $11.4 billion, research from EY has revealed.
By deal numbers, exchanges in Asia-Pacific accounted for six of the top 10 exchanges globally and three of the top 10 spots by proceeds.
The industrial sector’s 31 IPOs accounted for 20% of Asia’s total deals, followed by technology (15%), consumer products (13%) and materials (13%).
The largest IPOs by proceeds were all from China. Bank of Gansu and Huaxi Securities raised $900 million and $800 million each, while milk manufacturer Hebei Yangyuan ZhiHui Beverage Co gathered $700 million.
Asia’s first generation entrepreneurs and ageing wealthy have been selling their businesses over the years, which has translated into net new money for private banks in the region that are managing the wealth.
IPOs in China and Thailand are rumoured to have accounted for a significant portion of the CHF 28.4 billion ($29.7 billion) in net new money won by UBS Wealth Management last year.
However, IPO activity has slowed in the region compared to one year ago, with deal activity and total proceeds down 39% and 26% year-on-year respectively.
‘IPO activity in Asia-Pacific in Q1 2018 was defined by the slower pace of mainland China IPOs due to greater regulatory scrutiny and a slowdown in various markets,’ said Max Loh, EY Asean and Singapore Managing Partner, Ernst & Young LLP.
China’s securities regulator began clamping down on the IPO approval process in mid-2017 to stop a decline in domestic equity markets by reducing the supply of shares, after a flurry of activity since the start of the year.
Nevertheless, bucking the trend, the Hong Kong Stock Exchange was the world’s busiest, noted Loh. Hong Kong’s Main Market and its Growth Enterprise Market accounted for 20% of global IPOs, hosting 57 new listings that amounted to $3.1 billion.
Meanwhile, Asean markets also boosted overall Asia numbers with the exchanges hosting 18 IPOs, a 20% increase by deals compared with the first quarter of 2017. Activity was mainly driven by Thailand, Malaysia and Indonesia.
The Stock Exchange of Thailand held the top spot among Asean markets with six IPOs raising $373 million, while Vietnam’s Ho Chi Minh Stock Exchange raised $184 million from one IPO.
However, there was a significant decline in total proceeds in Asean, which fell to $661 million from $1.146 billion in the first quarter of 2017.
‘Asean exchanges will need to brace itself for headwinds from geopolitical risks; availability of alternative sources of funding such as private equity and crowdfunding; and uncertainties around trade policies and reforms,’ Loh said.
Meanwhile, at three IPOs each outside the home country, Singapore and mainland China were the top countries of origin in the first quarter.